Tech News & Commentary

Apple likely to increase stock buyback plan next week

With no new products to boost its financial results, Apple (AAPL) is likely to announce plans to return more cash to shareholders when it posts fiscal second-quarter numbers next week, Bernstein Research analyst Toni Sacconaghi said Wednesday.

Apple is scheduled to release Q2 results after the close on April 23.

"We expect Apple to announce a decision on incremental cash returns on its earnings call," Sacconaghi said in a research report. "We believe that many (particularly value-oriented) shareholders are looking for Apple to provide a framework and commitment for capital return, such as a minimum percentage of ongoing free cash flow that would be returned to shareholders."

Apple is likely to increase its existing stock-buyback program, Sacconaghi said: "We believe that Apple may add $30 billion to its current repurchase plans through year-end CY15."

He estimates that Apple's share repurchases total $45 billion to $50 billion of the $60 billion that the company said it would repurchase by the end of calendar year 2015.

"If Apple does not raise the authorization, it would imply (about) $2 billion of repurchases per quarter vs. an average of nearly $8 billion per quarter over the past six quarters," he wrote. "If Apple adds $30 billion to its current repurchase authorization, it would imply (about) $6 billion per quarter over the next seven quarters."

Apple has been under pressure from activist investor Carl Icahn and others to increase the amount of cash that it returns to shareholders. As of Dec. 28, Apple had nearly $159 billion in cash and securities, of which 78% was offshore.

Last year, Apple approved a $100 billion cash-return program, of which $60 billion is in stock buybacks. "We're a big believer in buying back the stock," Apple CEO Tim Cook said on a conference call with analysts on Jan. 27.

Analysts polled by Thomson Reuters expect Apple to earn $10.17 a share on sales of $43.55 billion in the March quarter. That would translate to less than a 1% increase in earnings per share and a slight decrease in sales vs. the year-earlier quarter.

Key issues for the Q2 report include iPhone sales through new distributor China Mobile (CHL), handset sales in other emerging markets and the impact of longer replacement cycles by U.S. carriers, Sacconaghi said.

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